NEW DELHI – India has announced about $ 1 billion in incentives to persuade companies to make more computers within India, hoping to reduce its trade deficit and attract manufacturers trying to diversify production in China.
India’s cabinet on Wednesday approved a rewards program for companies that expand local production of laptops, tablets and other computers. New Delhi said it would give companies cash equivalent to up to 4% of their sales value, depending on how much national production increased in the four years starting in April.
“Our focus is to bring the top five world champions to India and produce for the world,” said Ravi Shankar Prasad, minister of electronics and information technology, at a news conference. “Before announcing the incentives, we talked to the main manufacturers. They are just waiting. “
India is positioning itself as a smartphone production hub amid a U.S.-China trade war that has disrupted global supply chains and left tech companies like Apple and Samsung looking for alternatives to China to manufacture their products. Photo: Olivier Le Hellard for The Wall Street Journal
Indian officials are already discussing the new incentives with Apple Inc.
that has not yet started making laptops or tablets in India, just like HP Inc.
who has a presence in India, said a government official.
An Apple India spokesman did not respond to a request for comment. On Wednesday, HP did not respond to an email asking for comment.
The cash offer is part of Prime Minister Narendra Modi’s broader plans to try to make India self-sufficient in electronics and at the same time make it a leading global supplier.
India’s economy was hit harder than most by Covid-19. India’s gross domestic product contracted more than 15% in the six months to September, making it one of the biggest worst-performing economies in that period.
As the number of daily infections has plummeted, she has been looking for ways to spur more spending and growth. It eased restrictions on some foreign investments – in insurance companies, for example – and announced tax incentives and other incentives in the hope that local and international companies will spend on more facilities, creating jobs.
New Delhi hopes to use a combination of tariffs and benefits to persuade companies to earn more in India. India currently imports more than 80% of the laptops and tablets sold in the country, most of them from China, according to a study report by the Indian Association of Mobile Phones and Electronics and Ernst & Young.
“Before announcing the incentives, we talked to the main manufacturers,” said Ravi Shankar Prasad, minister of electronics and information technology. “They are just waiting.”
Photograph:
Naveen Sharma / Zuma Press
Laptop imports have jumped more than 40% in the past five years, to about $ 4.2 billion, as demand for the devices has increased with income and millions of Indians joining the network. Despite growing domestic demand, Indian manufacturers have been unable to compete in price with imports.
New Delhi’s new incentives are needed to make the domestic industry competitive, said Pankaj Mohindroo, president of ICEA, a lobbying group representing the electronics industry in India. With the right infrastructure and government support, India could end up producing more than 20% of the world’s phones, laptops and tablets, he said.
New Delhi hopes that the laptop and tablet industry can follow in the footsteps of the smartphone industry. The smartphone market in India used to be dominated by imports, but is now mainly produced locally. Imports represented 78% of the market in 2014 and are now at 8%, according to Counterpoint Research, a market analysis company.
The move to local smartphone production helped trigger billions of dollars in investment and created jobs like Samsung Electronics Co.
has set up its largest facility in the world outside Delhi and Foxconn Technology Group is making iPhones and other high-end smartphones near the southern city of Chennai.
The government hopes that rising labor costs in China, geopolitical trade and the security environment and the coronavirus outbreak will force global companies to seek alternative destinations, such as India, to diversify their supply chains.
The new incentive program is expected to generate direct and indirect employment opportunities for around 180,000 people and lead to production valued at $ 45 billion, more than 75% of which will be exported by March 2025, according to a statement from the Ministry IT on Wednesday.
Even before Covid, India was trying to attract new investment and offer its huge workforce as an alternative to China.
Some manufacturers have been looking for ways to reduce their dependence on China, as growing trade tensions and the Covid-19 crisis have made them realize that their supply chains are vulnerable.
“India certainly aspires to be a manufacturing center like China,” said ICEA’s Mohindroo.
Write to Rajesh Roy at [email protected]
Corrections and amplifications
An earlier version of this misspelled article by Ernst & Young. (Corrected on February 24)
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